CORPORATES were surprised, some of them terribly upset, over the Finance Ministry's sudden move that has virtually scuttled their plans to offer their shareholders a `handsome' dividend.

What surprised them is the sudden notice from stock exchanges that no relaxation will be given to companies for the notice period for fixing the book closure/record date for payment of dividend or interim dividend.

Many were confused as they tried to configure the outcome of stock exchanges' notices. They said they are still seeking clarifications from the stock exchanges. Some even hoped that the exchanges would come out with a solution.

Around 300 companies have so far announced plans to declare interim dividend, including those from large groups such as Tata, AV Birla and Reliance. Interestingly, many companies, including Nicholas Piramal, Ashok Leyland, Raymond Ltd, Blue Star, Nirma, Punjab Tractors and Gamon India, announced interim dividend on Wednesday.

While smaller corporates responded to queries, larger companies, which were among the first to announce interim dividends, were not forthcoming.

A spokesperson of one of the companies that has announced interim dividend said: "We are still awaiting an intimation by the stock exchange. All we know right now is that there is pressure on SEBI from the Finance Ministry, so it is possible that companies will have to comply with the 30-day notification clause."

The company secretary of a leading corporate said, "We've just been informed that the Bombay Stock Exchange will be sending out letters to each company tomorrow (Thursday) asking them to comply with the clause. The situation is very fluid now, so nothing can be said. We are all confused as to what the final outcome will be."

"Nobody really expected this situation. By announcing dividends before the end of the fiscal, companies were only enabling shareholders to save on taxes, which is not illegal," said a Finance Director of a company.

Meanwhile, Housing Development Finance Corporation Ltd (HDFC), a leading corporate with no promoters stake, on Wednesday informed the BSE that its board has decided "not to declare the proposed interim dividend".

Our New Delhi Bureau adds:The Confederation of Indian Industry (CII) has shot off a representation to the Finance Ministry to rescind the directive.

The move by the SEBI, following the advice given by the Finance Ministry on Tuesday, would lead to protracted litigation, besides leading to inter se disparities between companies that are granted waivers prior to March 5 and those who have applied on or after March 5, it said.

According to CII, in the past waivers had been given routinely by the stock exchanges.

More than 200 listed companies accounting for a significant share of the country's market capitalisation obtained record dates that would allow them to declare interim dividend in March 2002.

The companies did nothing illegal or underhand, the lobbying arm of the industry said.

CII added that if the intention of the Government was to tax dividends at the hands of the recipients, it should have explicitly forbidden declaration of interim dividend in March 2002 through the Finance Bill and a simultaneous notification.